Abercrombie's Earnings, Paribas' Poor Play, and the Big GDP News

While former Microsoft CEO Steve Balmer took a break from counting his billions to drop two of them on purchasing the Los Angeles Clippers, Wall Street was back to its winning ways. The Dow (DJINDICES: ^DJI) gained 66 points, and the S&P 500 rose to (another) new record high Thursday, despite some uninspiring news about the U.S. economy.

1. Abercrombie & Fitch enjoys surprise quarter

The official long sleeve T-shirt provider of teenage boys had a solid start to 2014. Abercrombie & Fitch (NYSE: ANF) reported $822 million in revenue during the first quarter, topping the $804.5 million Wall Street expected. Investors were stoked, bro, sending the stock up 5.8% Thursday.

Before you gel your hair in celebration, keep in mind that Abercrombie's analyst-beating revenues were still 2% lower than last year, and the company suffered a $13 million net loss during the quarter. Sales at Abercrombie's own brand stores fell 1%, while sales at their wannabe-surfer brand Hollister dropped 7%. Plus, the company is paying to restructure its failed Gilly Hicks underwear line.

The takeaway is that teens are simply turning away from Abercrombie like the company is the awkward kid who brought his sister to the middle school dance. This isn't 2002, LFO -- it's 2014, and Abercrombie's designers still haven't adjusted their weathered/ripped shirt designs enough to attract their target demographic.

2. BNP Paribas faces $10 billion fine for ignoring U.S.

The U.S. Department of Justice is frying up some freedom fries. Reports by The Wall Street Journal estimate the penalty for the French Bank BNP Paribas at $10 billion for ignoring U.S. Sanctions against Iran and other countries. BNP obviously will fight the charges, but the headline hit the price of U.S.-traded shares of BNP by 4%.

Sanctions are a way that governments can punish bad actors with dollars and cents. Cuba has been famously embargoed since the 1960s by the United States, but Iran is the biggest country being economically blacklisted. BNP's U.S. operations reportedly disregarded the Iran sanction for years, and even had elaborate instructions for employees to hide their dealings from authorities.

HSBC is the British/Hong Kong-based bank that had the biggest penalty ever for sanctions violations, at $1.9 billion in 2012. But BNP's behavior was allegedly so egregious that it could dwarf pervious fines.

3. Q1 GDP didn't impress

We know it's in the past, but the first quarter was even worse than we thought. The Commerce Department issued a revised calculation of Gross Domestic Product, or GDP, for the first quarter: The economy shrank at a 1% annualized rate versus the initial 0.1% growth estimate.

GDP is the broadest way to measure the size of an economy by the total dollar value of economic activity. It's like the scale in the locker room at the global econ gym, and these meatheads are constantly trying to get bigger. The 1% reduction shows just how affected the U.S. economy was by the harsh winter.

The silver lining is that nearly all the negative forces were from businesses reducing inventories. Companies held back from investing in machinery, equipment and, most significantly, inventory for their stores during the cold winter. That means that this could change in the second quarter when they need to stock their shelves again.

The takeaway is that the first quarter was the first of negative growth since 2011. It's bad no matter how you try to spin it. We need sustained economic growth of 3+% per year in order to reduce unemployment and lift wages; but it's not happening. Our 2%-2.5% growth is just enough to keep Wall Street and corporate profits up, but main street is still being left behind.

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